The challenges faced by female entrepreneurs need to be proactively addressed to create conditions conducive to scaling their businesses, but, with the right approach from the outset, success is eminently achievable.
Informed by research and her own advisory experience, Sheena Doggett a Partner in Corporate and M&A law in A&L Goodbody, one of Ireland’s leading law firms, has shared with us her top five recommendations for female entrepreneurs looking to grow their businesses.
1. Change your mind-set and you can change anything
The most important thing is the mind-set of the founders. Building up a successful business is a journey – not a transaction. You must demonstrate confidence and stretch. You must be resilient and determined. You need to have the conviction and the ability to bring a team, founders and customers on your journey with you. Critically for Women, don't be afraid to fail. Research projects on entrepreneurship show one of the main reasons women entrepreneurs don't enjoy enduring success is that they are thwarted by a fear of failure.
Research carried out by the European Commission (Policy Brief on Women’s Entrepreneurship, European Commission, 2017) found that 25% more women than men cite fear of failure as a key reason not to start a business. That is a mind-set that women must overcome.
2. Build the right team
The next thing investors look for is the quality of your team. Surround yourself with the best management that you can afford; not just with the right skills set, but also the right 'fit' and a strong team of advisors, directors and business mentors. I use the word fit because you will be working closely with the team for some intense and potentially challenging times.
Separate your own ownership from the management of the business. Entrepreneurs who share management control are more likely to be successful in securing investment in their business. Be honest with yourself and identify what you are not good at, know what you don't know and invest in those areas to ensure the business has the best bench strength. A strong leadership team is a critical factor that investors will look at when they evaluate any funding or investment proposal. It is also important to appoint non-executive directors to your corporate board or advisory committee – people who will 'get' you, who will understand and support your ambition for the business, but who will also challenge you.
3. Get the right type of support for your business
Most businesses start by boot-strapping. It makes sense to use the kitchen table rather than a boardroom table when you are starting up. Invest your own time and money, when you can. However, as your business starts to scale, have a well formed ambition for where the business is heading, an understanding of the scale of the market opportunity to be exploited, together with a realistic plan for access to the funds required to achieve that expansion.
As you choose to partner with venture capital or private equity, look to what those partners can offer beyond access to capital. Choose strategic partners as your funders. Those with prior experience and access to technology, expertise and networks which you might otherwise struggle to access.
While the number of dedicated business incubators and accelerator programmes for women is growing, the majority are based in the United States, Canada and Australia. Ireland actually ranks the best among EU countries with several new programmes being launched by Enterprise Ireland.
In addition to incubators, multinational companies can also play an important role. Many of the most successful multinationals in the tech, pharma or life sciences sectors partner with start-ups and early stage businesses as they invest in the future – bringing added value and supporting transformational change way beyond pure cash investment.
Be conscious that you won't need and you won't get all your funding at the start, but your business plan should show how you are going to fund your venture until it starts to generate revenue and can fund itself. Your funding commitments should cater for an ongoing stream of finance – with clear milestones and hard numbers over a number of years and multiple funding rounds.
4. Rewarding talent and protecting ownership
While choosing the right funding partners is critical, so too is attracting the best talent. Start-ups will always struggle to compete with established multinationals and those with deep pockets in the war for top talent. Equity is the strongest card you have to play to attract employees with critical skills.
However, I have seen plenty of examples when a start-up business has scaled up, and then a large private equity investment or a sales process comes along and suddenly very early stage minority shareholders have to be dealt with. That can be an unwelcome distraction at best and could give rise to an unjustified and disproportionate reward or to road blocks.
So, document any shareholding relationships very carefully. From the outset understand control and voting blocks and always have the ability to regain control of equity on pre-agreed terms where you part ways with employees as the business progresses.
5. Build your network
Finally, get to know people who can help advise and support you as you seek to grow your business and be comfortable and confident tapping in to them – be they lawyers, accountants, fellow business owners and mentors who have seen it before and who have been on a similar journey. Those networks will assist with designing business plans, assessing funding requirement options and making referrals and introductions.
The investors I work with look very carefully at the mind-set of the founders, their leadership team, the sustainability of their funding investors and their talent pool.
In developing each of these, Ireland has a strong and proven track record. The Government, the Universities and our tax regime are all supportive of innovation and entrepreneurship, especially in early stage start-ups. 35% of all high-potential start-ups backed by Enterprise Ireland last year were led by women.
The challenge is how to encourage start-ups further, particularly fostering the untapped potential for female entrepreneurs.
I see steady growth in the number of women in leadership roles in banks, investment firms and private equity. These women are helping to support women-led companies in securing access to capital and in scaling up. They bring different perspectives and a broader range of business types to their investment committees. They challenge the status quo and traditional investment patterns. And I would hope that this will encourage more and more women to start businesses and to also stay with them longer to get the full benefit of scaling up.